A powerful disincentive for not offering employees health care insurance is included in the proposed 2020 budget introduced by Gov. Gina M. Raimondo.
If a large employer in Rhode Island does not provide health care insurance, and an employee then qualifies for state-supported Medicaid, the business will be charged as much as $1,500 annually, per employee.
The so-called Medicaid Employer Assessment Fee is intended to offset the state’s cost of providing Medicaid coverage to state residents who are employed, either part time or full time, by employers that don’t provide a health insurance option.
If authorized, it could generate $15.6 million for the state in the upcoming fiscal year.
The program is based on one started in Massachusetts in 2018.
Unlike the Bay State, which applied the fee to any for-profit business with six or more employees, Rhode Island has proposed to exclude nonprofits and small businesses. Instead, Rhode Island would target companies that employ 300 or more people on a part-time or full-time basis. Companies would not pay a fee for any disabled employees that qualify for Medicaid benefits. Governmental entities also are excluded.
Business organizations say they are still getting information about the proposal but are concerned it targets job creators with what could become a substantive penalty.
The proposal is expected to get its first public hearing in the House Finance Committee in late February or March, according to Larry Berman, a spokesman for House Speaker Nicholas A. Mattiello.
Mattiello has not taken a position on the proposal yet, Berman said.
Businesses affected include any large company with part-time employees that do not qualify for employer-sponsored health care benefits, including Ocean State Job Lot, which did not immediately return a call seeking comment. The North Kingstown-based retailer has 1,388 full-time employees in Rhode Island and Bristol County, Mass., according to the 2019 Providence Business News Book of Lists.
‘You’re talking about 150 employers paying nearly $17 million.’
JOHN SIMMONS, Rhode Island Public Expenditure Council executive director
John Simmons, executive director of the Rhode Island Public Expenditure Council, said he and staff met with state officials recently to get a better idea of the proposal. He was told some 20,000 people in the state receive Medicaid benefits.
Because the proposal also includes part-time workers, it is hard for employers to know whether they have someone who is qualifying for Medicaid, rather than getting insurance through a spouse or another employer, Simmons noted.
Under the proposal, it appears that multiple companies could be assessed for the same part-time employee if that person works at more than one part-time job, he noted.
“We are still trying to understand the implications. How did they come to the estimate?” he said.
The amount of the proposed revenue indicates the companies that are subject to the assessment could be paying substantive amounts.
“When you look at the size of this, you’re talking about 150 employers paying nearly $17 million,” Simmons said. “The question we ask is what is the economic impact? Is there any analysis of Massachusetts? There are consequences, some of them unintended, where people are losing jobs.”
On average, the Medicaid program costs the state about $4,000 to $5,000 per person, per year, according to Jonathan Womer, the state’s budget director, speaking at a press briefing on the budget in January.
The employer assessment would be calculated as 10 percent of employee wages, up to $1,500, he explained.
“This hopefully would do two things. One, to incentivize employers to provide health insurance to their employees,” Womer said. “And to help the state mitigate its costs in subsidizing employers who [do not] provide health insurance.”
The state has not released a list of employers who could be subject to the fees, based on their size and labor force. But Womer and other state officials estimate that 140 companies could be subject to the assessment.
The kinds of businesses likely to be included are large retailers and hospitality companies, said Lachen Chernyha, director of research and policy for RIPEC.
The law in Massachusetts became so problematic for companies that they were allowed to apply for waivers, so they won’t have to pay the assessment, she noted.
While the Rhode Island business system tends to be dominated by those with fewer than 300 employees, the impact could be significant, she said.
“The larger companies account for a large share of Rhode Island employment,” she said.
Although the proposal would specifically bar employers from retaliating against employees whose qualification for Medicaid triggered the state assessment, companies may respond by hiring fewer employees to make up that amount, or by shrinking their workforce, she said.
“In Massachusetts, they did observe these kinds of negative economic consequences,” she said.
Erin Donovan-Boyle, the executive director of the Newport County Chamber of Commerce, said the proposal would not apply to most employers in Greater Newport, because of the company size requirement. For that reason, the response hasn’t been a loud outcry, she said.
But for workers, the assessment could also represent an unwanted impact. So many people now work part time for flexibility, and this appears to target larger employers who hire them, she said.
“You have to look at it from the employee point of view,” she said.
Mary MacDonald is a staff writer for the PBN. Contact her at Macdonald@PBN.com.
